After having stayed there for 8 days definitely make me the "expert" of Iceland. By some fluke shot planning, I started my trip with staying 5 nights in an Airbnb room in Hafnarfjörður followed by 3 nights stay in Reyklavik (also Airbnb room). It works out well as I did most package tours at the start of the tour and then spent the end of the trip hanging around Reyklavik to soak in the beautiful city.
Rented Car vs Excursion Tours
The optimum travel would be to have a party of 4 and get a rental car. Rental car is expensive but once divided it's much cheaper compared to tour excursion unless it's for 1 or 2. Car rental advertises for C$120 a day, not sure what else is not included in. So you must do the math on the rental car versus tour exclusions. One thing to note, is that there is no free parking in Reyklavik (not sure about hotel though). I have seen men hard at work issuing parking fines so make sure you have valid parking tickets.
However in Hafnarfjörður, parking on the small street is free and therefore if you plan to get a rented car, staying at Hafnarfjörður may be a better option and after all the sightseeing, dump the rented car and stay right at downtown Reyklavik as most places are within walking distance. Try to stay with in the core downtown where they are lots of shops and eateries.
http://www.visithafnarfjordur.is/
http://www.visitreykjavik.is/
Airport Bus
You can also get a FlyBus ticket online and it will drop you off at or near your hotel/apartment. Best to do your homework and get your tickets through internet and to figure out your drop off point. The reason why you don't want to do it there is because the pronunciation of their words are so difficult and they speak the name so fast that you have no idea where that place is. If you book through Airbnb, the host will provide you with all the information.
Excursion Tours
If you decide not to have a rented car and go with day tour excursions, it's good option too. No brainy, everything all planned out and no stress in driving, planning and etc. The tours are by no means cheap but nothing in Iceland is cheap for that matter. All tour excursions provide pick up in smaller vans and tour takes off from a central location in Reyklavik. The Reyklavik Excursion Tour does a pick up at Viking Hotel in Hafnarfjörður promptly 30 mins before tour departure. The travel between Hafnarfjörður and Reyklavik is about 20 mins. After the tour, a drop off is also provided but always the last to go back cos furthest away.
The one tour that is a must is the Golden Circle Tour, if you are driving, follow the itinerary found in the internet. I did the Glacier Lagoon at Jokulsarlon tour which is very long tour (from 7:30 to 10:00 pm) to see the iceberg (main attraction) and 2 water fall by the south coast. Then I did a South Coast tour on its own and this tour overlap on the water falls with the Glacier Lagoon tour. The Glacier Lagoon boat trip which is optional is really not worth it, better to spend more time on shore to take more pic of the giant iceberg.
Blue Lagoon a geothermal spa is the one most visited place. I like it cos it's so relaxing; do purchase your tickets earlier c(on the internet) cos they can get very full. The round trip bus fare is about C$40. Again decide if it's better to travel by bus or have a rented car. Should try to stay longer in the Blue Lagoon since it so expensive. Get a chair on a lounge to take a nap and after that go back to the nice warm water.
Around Reyklavik
Don't miss the church, Hallgrímskirkja in Reyklavik. Go up to the top as it offers a very 360 view of the city.
There are lots of information on the internet on what to visit so you just need to decide what you want to do and see. Don't recommend seeing the 360 deg Cinema at Harpa.
If it gets too cold, there will be no whales so don't waste your money on it. A visit to the old Harbour is a must; I found good seafood there. Had the lobster soup and the sea scallop there.
http://www.tripadvisor.ca/Restaurant_Review-g189970-d1209708-Reviews-Saegreifinn_The_Sea_Baron-Reykjavik_Capital_Region.html
Food
Everything in Iceland is expensive except for fresh air. Food is very expensive and seafood is not cheap. If you opt for Airbnb, cooking on your own is a good option. Supermarket food is not very cheap either. It's good to pack a sandwich on your trip, to allow you more time to take pics if need to. You can bring food into the country, no need to declare so you may want to bring your favorite snacks / food over to eat and maybe cook.
Eating out is fun too and you can check out the menu before going in so no surprises after sitting down.
Northern Lights and weather
Northern Lights can be seen starting September to March. People has said that you cannot see the lights in the city cos it's too bright. I have seen the lights at Hafnarfjörður (caught it while looking at the window of the apartment and quickly went out). The one I saw by the waters in Reyklavik was however very faint. Alternatively, you can catch a tour by boat or by bus to outside of the city. If you don't see the lights, you get to go out another night to see if you will lucky this last time. I didn't think it was worth the money to pay to look up into the sky. As for taking picture, it's guarantee you cannot take the lights well with a handphone so need a camera to do it. I had to play with the white balance and increase the exposure before the lights can be captured. Check out this site, to see the forecast and a clear sky is also needed to see the lights.
Northern light tends to appear around 11:20 pm and by 12:30 you don't see anything, time to head home.
http://en.vedur.is/weather/forecasts/aurora/
It does rain often in Iceland so best to have a raincoat with you. Again, no cheap raincoat for sale in Iceland. Their weather forecast is pretty accurate too.
Internet
You can get internet access in most places including tour buses but they not necessarily all work. You can buy a vodaphone SIM card right at the duty free check out counter by the baggage claim for C$15 for 300 MB data and some talk time. It always nice to have data in case you are lost.
Best Travel Time
Iceland has more tourist than population and peak timing is June to August. Which means it will literally be packed with tourists. Sept is already low season and still lots of tourists. Of course during the peak period, there is 24hr daylight so can do and see so much more.
Icelandic Currency, Kr
It's hard to find money changer in Halifax so I went through the TD bank to get some Kr. - big mistake exchange rate is so very low. Forget about bringing enough cash, just carry a credit card on you. All places take credit card even at Dunkin Donuts, so just charge everything and credit card rate is definitely much better than the bank.
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